By Dow Jones Business News,
May 05, 2014, 07:55:00 AM EDT
Pfizer Inc. sought to increase the pressure on AstraZeneca PLC to enter talks on creating the world's biggest
pharmaceutical company, as it separately reported declining quarterly results that underscored why it is interested in a
Pfizer has been pursuing its British rival since November, but AstraZeneca has rejected the advances. Last week,
AstraZeneca said Pfizer's most recent cash and stock proposal valued at GBP50, or $84, a share "substantially"
undervalued the company.
In an interview on Monday, Pfizer Chief Executive Officer Ian Read disagreed, calling the company's offer to
AstraZeneca "compelling" and urging the U.K.-based company to enter talks.
"I'm hoping they will come back into discussions, but we are reviewing our options," he said.
Mr. Read agreed that Pfizer's options include walking away from a potential deal and even looking for a different one,
though he argued that a combination would benefit both companies and their shareholders.
A tie-up would put the combined company in a better position to deal with increasing reimbursement pressures and "
allow us to be more successful commercially than either company alone," he said.
The Pfizer CEO said his talks with AstraZeneca shareholders suggest they are open to doing a deal and want to discuss
the terms further.
Frank D'Amelio, the U.S. drug company's chief financial officer, said Pfizer is willing to adjust its latest offer,
including the proposed mix of 32% cash and 68% stock, but "we want to engage with AstraZeneca" and look at its books.
A combined company would sell drugs for most major diseases, including cancer, diabetes and heart disease. And Pfizer
has said it would use the deal to cut overlapping costs, though it hasn't specified how much.
New York-based Pfizer also has said a combination would have tax advantages, because Pfizer could use its cash and
equivalents held overseas to help pay for a deal, freeing them from the U.S. taxation they would be subject to if Pfizer
repatriated them. If the deal succeeds, Pfizer would also move its official headquarters from the U.S. to the U.K. to
take advantage of lower tax rates there.
In a call with investors and analysts, Mr. Read said Pfizer was bidding for AstraZeneca out of a position of strength,
as sales of new products like rheumatoid arthritis pill Xeljanz and anticlotting agent Eliquis pick up steam.
Yet the company's first-quarter results showed the extent of Pfizer's difficulties in finding new growth after top-
selling products like the cholesterol fighter Lipitor lose patent protection.
The quarter's results were especially hurt by the end of an alliance with Amgen Inc. to sell the rheumatoid-arthritis
treatment Enbrel in the U.S. and Canada.
For the latest period, Pfizer reported a profit of $2.33 billion, or 36 cents a share, down from $2.75 billion, or 38
cents a share, a year earlier. Excluding purchase-accounting adjustments and other items, earnings rose to 57 cents a
share from 51 cents.
Revenue shrank 8.5% to $11.35 billion. Adjusted revenue, which excludes restructuring charges and other items, fell 9%
to $11.3 billion.
Analysts polled by Thomson Reuters expected per-share profit of 55 cents and revenue of $12.08 billion.
The first-quarter earnings marked the first time that the company reported results for each of the three units carved
out of its commercial operations at the start of the year.
Two of the units sell patent-protected drugs such as Lyrica pain treatment and Xalkori lung-cancer therapy, while the
third sells products like Lipitor that have lost exclusivity or are close to facing generic competition.
Pfizer has said it would explore reorganizing these units into independent business entities in the future. Mr. Read
told analysts and investors Monday that any such move would divide Pfizer into a company selling patent-protected
pharmaceuticals and another selling off-patent drugs.
"We are not talking about a three-, four-way split. We are talking about two main segments," he said.
Ben Fox Rubin contributed to this article
Write to Jonathan D. Rockoff at firstname.lastname@example.org
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